Assessing Economic Impacts of Copyright Reform on Selected users and Consumers

V. Sound Recordings

The person who undertakes the financial and technical arrangements necessary for first fixation of the sounds of a recording is called the maker. The maker of a sound recording is granted the following rights in relation to the sound recording or part thereof:

1. to publish it for the first time;
2. to reproduce it in any material form; and
3. to rent it out.

The rights of the maker comprise the right to authorize the aforementioned acts. Recordings of works and compilations of sound recordings are protected as sound recordings.

The rights are conditional on nationality or residency requirements of the maker and on having first publication of a quantity sufficient to satisfy the reasonable demands of the public taking place in Canada, a Berne Convention, a Rome Convention country or, a WTO member country. The rights terminate 50 years from the calendar year-end of first fixation.

Section 19(3) provides a 50-50 sharing of the remuneration between makers of sound recordings and performers.

Section 19(1) of the Copyright Act grants performers and producers of sound recordings a right of equitable remuneration for the performance in public and the telecommunication (except for retransmission) of a published sound recording. The remuneration right gives performers and makers of sound recordings the opportunity to claim royalties from those who use their recordings for public performance or broadcast in Canada and in countries that abide by the Ro me Convention. It does not allow them to control these uses.

In order gain title to a right of remuneration the maker of a sound recording must be a citizen of Canada or a citizen or permanent resident of a Rome Convention country at the date of first fixation. If the maker is a corporation it is entitled to remuneration if headquartered in one the aforementioned countries.

The US is not a member of the Rome Convention. It has ratified the WPPT but signatories of that treaty are not obliged to grant a right to remuneration for the broadcast of sound recordings. As of yet, the US has not amended its law to include a right of remuneration for the broadcast or public performance of sound recordings.

Because the WPPT provides a term of 50 years following publication, or failing publication within 50 years a period of 50 years from the year of fixation, it is possible to imagine a protection period of 99 years. This possibility arises if publication takes place in the 49th year after fixation.

Industry Canada has raised the following questions in regard to sound recordings:

1. What is effect of extending the term of protection for makers of sound recordings?
2. Should a similar extension be granted to performances contained in these sound recordings?

Section III has addressed the issue of term extension for works in general. Under Canadian law, sound recordings have a shorter protection period than most works. They are protected for a period of 50 years from fixation. Adding 20 years of protection would contribute 2.3% to the present value of royalties under a 7% discount rate, assuming that the flow of royalties remains unchanged during the whole period.³³ Under identical assumptions, extending the protection period to 100 years would contribute a mere 3.0% to the present value. This, however, is true only if the royalty flow remains constant over time. When the annual royalties decline rapidly over time, as is typical, the increase in present value would be considerably smaller.

While such outcome is possible, it is highly unlikely. A recording with commercial potential is typically published soon after fixation. Industry members point out that recordings are published several years after fixation in rare instances. This happens when works originally thought to be lacking profit potential become commercially viable. This can occur in response to the rising popularity of a performer. Delays in publication also come about when it is not is commercially prudent to release as many works as the artists is contractually committed to produce within a given period. In such case, however, the delay between fixation and publication remains relatively short.

Overall, it appears that the change in protection term required by the WPPT would affect neither producers nor users.

In the view of some industry members, common sense demands that the extension required by the WPPT for makers also be granted to performances. They argue that prolonging the protection of performances would have the advantage of reducing administration cost. This is not a strong argument, considering that collective management keeps administration costs in check. The argument becomes weaker yet when one considers that recordings have a relatively large number of right holders whose rights expire at dates that can be far apart. In the case of sound recordings, stakeholders are numerous and various components of a work may have been created at different times. The implication is that extension of the protection term for makers does not warrant a similar extension for performances.³⁴

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³³ This is a higher percentage than the 0.16% found in section III (of this study...). The reason is that in the case of sound recordings one adds 20 years to a protection period that is currently limited to 50 years. In section III the calculations were made assuming that term extension would prolong the duration of protection from 90 to 110 years.

³⁴ It does not imply the absence of other reasons for granting such extension.